Federal Review of Cattle Markets to Last Months

A review of U.S. cattle markets and live cattle futures by the Government Accountability Office will last until at least May of 2017. A spokesman for the GAO says the investigation is being done at the request of the Senate Judiciary Committee. Pro Farmer’s First Thing Today reports the review was announced in May of this year to look at the reasons for a sharp drop in cattle futures in 2015. The investigation includes examining the impact of high-frequency trading and other changes in the fed cattle market the past ten years. CME Group, which operates U.S. cattle futures markets, has said high-frequency trading accounts for 10 percent of the volume in CME’s cattle markets and 50 percent of its overall average daily volume.

The US Government Accountability Office (GAO) accepted a request by the Senate Judiciary Committee to review cattle pricing, including the impact of high-frequency trading on cattle futures contracts, Reuters reported. The committee made the request in April.

Livestock groups requested a formal investigation into the volatility in live cattle futures. R-CALF said that market fundamentals supported historically high cattle and beef prices in 2014 and the first half of 2015. However, cattle prices inexplicably collapsed in the second half of 2015.

The National Cattlemen’s Beef Association (NCBA) expressed concerns about high-frequency trading on the Chicago Mercantile Exchange (CME) and requested reforms such as limits on messaging for livestock contracts; a one-second delay between trade actions among other reforms.

In February, the CME Group implemented new rules aimed at enhancing livestock market trading. The new measures include reduced trading hours and adding livestock contracts to the CME Globex Messaging Efficiency Program, which caps the number of trades actually executed.